The global cryptocurrency market has shed more than $1tn (£760bn) in value over the past six weeks, as mounting concerns about a potential tech bubble and fading hopes of a US interest rate cut weigh heavily on investors.
According to data from CoinGecko, which tracks more than 18,500 digital coins, the total market value has dropped by a quarter since its peak in early October. Bitcoin has fallen by 27% during the same period, sinking to $91,212 – its lowest point since April.
Growing anxiety over a possible artificial intelligence bubble has added further pressure to global markets. Even Sundar Pichai, the head of Google’s parent company Alphabet, warned that “no company” would be safe if the AI boom collapses. He said there was “irrationality” driving the current surge in AI-related stocks.
Stock markets across the world have also been hit. The UK’s FTSE 100 slipped another 1.2% on Tuesday, marking its fourth consecutive day in decline, while Europe’s Stoxx 600 also fell 1.2%. Asian markets fared even worse, with Japan’s Nikkei 225 dropping 3.2% and Hong Kong’s Hang Seng down 1.7%.
Concerns have also been raised by major tech figures. Sebastian Siemiatkowski, chief executive and co-founder of Klarna, said the enormous investment flowing into computing infrastructure made him “nervous”. Speaking to the Financial Times, he said: “I think [OpenAI] can be very successful as a company but at the same time I’m very nervous about the size of these investments in these datacentres.”
He added that the soaring valuations of AI-driven companies, including chipmaker Nvidia, pose further risks. Nvidia became the first firm to reach a $4tn market valuation this year, followed shortly by Apple and Microsoft. Siemiatkowski warned: “That makes me nervous, because of the amount of wealth that is currently automatically allocated into this trend, without some more thoughtful thinking.”
He also noted the wider impact on ordinary savers, saying: “Your pension right now is going into that theory that it is a good investment.”
A growing number of analysts now see an AI bubble as one of the biggest threats to global markets. A recent Bank of America survey found that 45% of fund managers view it as the largest tail risk.
Meanwhile, the price of gold – typically seen as a safe haven – is also slipping. Spot gold fell 0.3% to $4,033.29 an ounce on Tuesday after hitting a one-week low. The decline follows reduced expectations that the US Federal Reserve will cut interest rates next month, making non-yielding assets such as gold less attractive.
However, UBS analyst Giovanni Staunovo said the dip may be temporary. He commented: “I would expect gold prices to bottom out soon, as I still see the Fed cutting rates several times over the coming quarters, and central banks’ diversification into gold remains strong.”
